The National Bank of Egypt (NBE) and Banque Misr's issuing of two new saving schemes with a return rate of 12.5% has shaken other banks operating in the Egyptian market. According to sources, the banks promptly held intensified meetings on Sunday to discuss the effects of the step on their customers' deposits, as well as the future of their interest rates on their saving schemes. The banks are concerned that their customers will withdraw their savings in order to buy the NBE and Banque Misr certificates, due to their high return, which exceeds the average interest rates on all the saving schemes of banks by about 2%-2.5%. The banking market is awaiting the returns of the treasury bills and bonds issued by the government, while there are strong expectations that they will be increased in the next period. Banks are the largest investors in governmental debt instruments, as the high returns of these instruments encourages banks to increase the interest rates they give their customers, even though such steps add more burdens on the country's general budget. According to Tamer Yousef, head of the Treasury and Money Markets Department in a foreign bank operating in the local market, issuing saving schemes with returns amounting to 12.5% by the NBE and Banque Misr will definitely be followed by an upwards trend in the interest rates in the market as a whole. Yousef explained that the rest of the banks operating in the market may have to raise the interest rates on their saving schemes, fearing their customers' will rush to purchase NBE and Banque Misr certificates. He added that the interest rate increase may be an indication of the Central Bank of Egypt's (CBE) intention to raise its major interest rates during the next Monetary Policy Committee meeting. The Ministry of Finance may also face pressure from the banks to increase the interest rates on the debt instruments it issues, in which the banks are the largest investors. "Private banks, specially the small ones, may not be able to handle raising the interest rates in their saving schemes in order to face both certificates, except if they are compensated by an increase in the returns on debt instruments, which the banks are waiting for at any moment," according to Osama El Manialawy, Assistant of General Manager of Treasury Department in a private bank. He added that the problem here is the effect of this on increasing the country's general budget deficit, where the increase in the return on the debt instruments will lead to increasing the deficit. El-Manialawy said the government can increase the prices of the long-term bonds, like the 10 year- bonds, to compensate the banks, on one hand, and on the other it can delay the cost the government pays for a relatively long period. The NBE and Banque Misr surprised the banking market, Saturday, by announcing saving certificates with a return rate amounting to 12.5% annually, that can be taken monthly, which is the highest return granted in the three-year tools of savings in pound in the Egyptian market. According to Banque Misr, it offered the saving scheme to meet its customers' needs from all categories, and to diversify the products offered to them, especially in the field of saving schemes in pounds. A statement by the NBE said the bank issued the certificate to meet the needs of its customers, and to help them in obtaining a steady and high monthly income, enabling them to face the price increases.
